Unlock the Canada Pension Plan’s winning formula for your own portfolio
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Many Canadians recognize the Canada Pension Plan (CPP) as a familiar line item on their paystubs, but few may realize the profound transformation it has undergone over the years. In 1999, the CPP was modestly funded and heavily reliant on government bonds — a safe but limited strategy. Today, the CPP fund has transformed into a diversified investment powerhouse with over $632-billion in net assets and an impressive annual net return of 9.2 per cent.1
The CPP fund’s journey to becoming one of the largest pension funds in the world has been fueled by a strategic shift from a 100 per cent government bond portfolio to a balanced mix2:
- Private equities (31 per cent)
- Public equities (28 per cent)
- Credit (13 per cent)
- Government bonds (12 per cent)
- Real estate (8 per cent)
- Infrastructure (8 per cent)
The CPP fund’s longer-term performance highlights the resilience and effectiveness of a balanced investment strategy, smoothing out annual fluctuations and showcasing consistent growth. Its success story offers a compelling case study for individual investors, demonstrating how adopting a diversified portfolio can lead to significant growth while effectively managing risk.
What investors can learn from the CPP’s successful investment strategy:
Embrace diversification
Just as the CPP diversified its investments beyond government bonds, individual investors should consider a mix of asset classes. A balanced portfolio, such as a 60-40 split between equities and bonds, can provide both growth and stability when tailored to your risk tolerance and financial goals.
Stay balanced for the long term
The success of the CPP fund was built with a long-term perspective, emphasizing sustained growth over immediate gains. Individuals investing for long-term goals should take a similar balanced approach rather than focusing on short-term market fluctuations.
Regularly rebalance your portfolio
Maintaining a balanced portfolio requires regular rebalancing. The CPP’s disciplined approach to adjusting its asset allocation ensures that it stays aligned with its investment strategy. Likewise, individual investors should work with their advisors to review their investment plan and asset mix.
Be adaptable
The CPP fund’s evolution from a bond-centric fund to a diversified portfolio illustrates the importance of adapting to changing market conditions and investment opportunities. Individual investors should remain flexible and be willing to adjust their strategies as needed.
Seek professional guidance
The CPP fund benefits from professional management, which can help navigate complex investment landscapes. Individual investors can similarly benefit by working with financial advisors who offer personalized advice and who can help manage a diversified portfolio effectively.
Achieve your financial goals
By following the CPP’s lead and embracing a balanced investment strategy, individual investors can aim for a similar blend of growth and stability. Whether you’re saving for retirement, planning for a major purchase or building wealth, a diversified portfolio that aligns with your financial objectives and risk tolerance can set you on a path to long-term success.
Ready to get started? Contact a financial advisor to evaluate your current asset allocation and explore the value a balanced investing approach can offer.
1Source: Canada Pension Plan Investment Board 2024 Annual Report. Data as at March 31, 2024.
2Source: Canada Pension Plan Investment Board. CPP Investments ranks among world’s best with 10-year returns. Data as at April 11, 2024.
Advertising feature provided by CIBC. The Globe and Mail’s editorial department was not involved.
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